Engineering and construction major Larsen & Toubro (L&T) is adopting a calibrated approach to pushing the Rs 10,733 crore takeover bid for Bengaluru-based information technology services company Mindtree after offering to acquire nearly 67 per cent stake. SN Subrahmanyan, L&T managing director and chief executive officer, has offered to allow Mindtree to keep its separate identity for "some time to come" claiming L&T was looking at a merger of love and not coercion.
Subrahmanyan disapproved of the use of the phrase, 'hostile takeover' for L&T's bid on Mindtree, and said his company is not "not a corporate raider" but a professionally run, entrepreneurial company seeking to work with another like-minded entity to realise bigger aspirations in technology services. "It shouldn't be seen as a hostile takeover," Subrahmanyan told The Times of India. "We didn't go looking for Mindtree. Its largest shareholder, VG Siddhartha, approached us with a deal after he tried engaging with the founders regarding his exit. Being a founder-investor, he was emotional about to whom he would sell the stake," the report quoted him as saying.
"Emotions have to be overcome as we go forward. The senior people in the management are (our) personal friends, good people, men of repute and who have done their best to get Mindtree to where it is today. We feel a lot of positivity and sync going forward," Subrahmanyan told reporters on Tuesday, according to a report in Business Standard. Of the Rs 10,733 crore L&T has set apart for the takeover, Rs 3,269 crore will go to acquiring the 20.32 per cent stake that Café Coffee Day (CCD) founder VG Siddhartha controls. L&T has set apart Rs 2,434 crore for buying 15 per cent stake from the market and Rs 5,030 crore for its open offer for 31 per cent stake. Subrahmanyan explained that L&T did not want to use the balance sheet of its listed software subsidiary LTI (known earlier as L&T Infotech) for executing the deal and such an exercise would also have led to a distraction.
Some mutual fund houses are reportedly not happy with the deal as the open offer premium is only a paltry 1.81 per cent and that they would acquiesce more readily if L&T sweetened the deal further. It would take 30-45 days for getting requisite clearances from the Competition Commission and anti-trust watchdogs in certain markets that LTI and Mindtree are operating, according to L&T Group CFO R Shankar Raman. The management of Mindtree had first approached L&T for a deal a few years ago, but the focus on succession planning and ongoing capex had prevented a deal from taking shape, the report said.
Subrahmanyan denies any intention of L&T to merge Mindtree with its technology services business. "We would provide board oversight, customer connections, network and balance sheet, which Mindtree can leverage while bidding for large contracts," according to Subrahmanyan. He hoped that better sense, maturity and rationality would prevail among Mindtree promoters, who have described the takeover attempt as a grave threat to their "unique" organisation.
Subrahmanyan denied any plans to disturb the existing Mindtree management and said Mindtree promoter Krishnakumar Natarajan was a personal friend. "He had also come for my son's wedding last week and we spoke this morning as well... We will continue to have a dialogue with the Mindtree management," Subrahmanyan said.
Mindtree promoters have, meanwhile, hinted at various defensive measures to ward off the L&T attempt. There have been reports that the promoters have approached some large institutional investors to take up more stake to keep L&T at bay. The promoters may also be planning Rs 1,000 crore share buyback. Meanwhile, Subroto Bagchi, one of the promoters, resigned his position as head of the Odisha Skill Development Authority to return to Bengaluru to help the company fight the takeover attempt.
He said on his Twitter handle: "An imminent threat of a hostile takeover of Mindtree has made me resign from the (Odisha) government, (so that I will be) able to go, (and) save the company," he said. "I must protect the tree from people who have arrived with bulldozers and chainsaws so that in its place, they can build a shopping mall."